Antitrust Official Gets Stampeded By Big Beef

At sale barns, like this one in Kingsville, Mo., cattlemen still bid openly for breeding stock. Meatpackers once bought on the open market, too.

Frank Morris for NPR

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Originally published on January 26, 2012 8:34 am

Dudley Butler is quitting his job tomorrow. Never heard of him? He's President Obama's appointee to run the division of the U.S. Department of Agriculture that governs antitrust issues in the meat industry. He was part of a cadre of high-level bureaucrats charged to expose and fight agribusiness monopolies. In fact, he was the last of that group.

Butler set out to change the cattle industry. But he ran into many hurdles, not least of which was fierce opposition from meatpackers, who exert a lot of influence in Washington, D.C.

Meatpacking is a business cattleman Shawn Meyer will tell you gets harder all the time. "Seems like the smaller go away, and the bigger just get a little bigger," says Meyer.

More than half a million families have stopped raising cattle in the past three decades. Some say efficiency and economies of scale fully account for the decline. Others blame a revolution in the way livestock is sold.

Meatpackers once bought cattle on the open market. But those days are over, says Steve Kay, the publisher of Cattle Buyers Weekly. The four big packing companies now buy mostly on contract — a more sophisticated and efficient arrangement.

"It rewards producers who produce the most consistent, highest-quality cattle, so that we can then produce more consistent, high-quality beef for consumers," Kay says.

Packers get a guaranteed supply; cattle producers get a guaranteed market. That's good for everybody, according to Mark Dopp, senior vice president of the American Meat Institute.

But it also removes a measure of independence, and that rankles some small producers.

This happened in the poultry industry years ago. Now, fewer producers raise a whole lot more birds, and work governed closely by contracts with packers.

Fred Stokes, a Mississippi cattleman who runs the Organization for Competitive Markets, says beef is next.

"We call it 'chickenization,' " says Stokes. "Go the way the poultry guy is, where the farmer owns the land, totes the mortgage, does the work, but is under contract to someone who determines how much he's going to get paid."

And if that pay seems unfairly low, well, Stokes says there's not much a producer can do about it under the current interpretation of the Packers and Stockyards Act.

This is where Butler comes in. A lawyer with experience suing poultry processors, Butler took over the Grain Inspection, Packers and Stockyards Administration determined to make litigation against packers easier.Stokes, a friend of Butler, saw hope for the family farm. Stokes says this was unprecedented.

The USDA linked up with the U.S. Justice Department to launch a massive study of antitrust issues in agriculture, which led to five big public hearings. Christine Varney, who was an assistant attorney general, led a freshly invigorated antitrust department, launched investigations and worked with Butler. Now, Varney says she's sad to see Butler step down.

"I think he has a done a great job for the farmers of America, and it's a great loss to the Department of Agriculture, but these are tough jobs and everybody serves their time," says Varney. In fact, Varney herself resigned last summer.

Bill Bullard, who runs R-Calf USA, a cattleman's advocacy organization, says Butler and Varney were part of the reformist team that was supposed to restore competition to the market. "Now they are all gone, and we have seen no improvement, whatsoever in the ongoing erosion of competition," he says.

Of course, that's not the way major meatpacking and livestock groups see it. They say what Bullard would call increased and transparent competition for cattle would have thrown a monkey wrench into the beef industry. It would be big enough to cost thousands of jobs, millions of dollars and significantly raise the price of beef, they say.

In the end the U.S. House of Representatives refused to fund implementation of a proposed change to a rule, known as the GIPSA rule, that Butler authored. It would have forced beef packers to change the way they do business.

So, after a long fight, the big meatpacking companies will keep their efficient production system, while smaller producers continue to scramble for their place in the modern meat industry.

Frank Morris is a reporter for member station KCUR and Harvest Public Media.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

MELISSA BLOCK, HOST:

Dudley Butler is quitting his job tomorrow. Never heard of him? He was picked by President Obama to run a division of the USDA. Butler was part of a group charged with exposing and fighting agribusiness monopolies. But he's the last of the group.

Frank Morris of Harvest Public Media explains his mission and what happened to him.

FRANK MORRIS, BYLINE: Dudley Butler set out to change the cattle industry, a business cattleman Shawn Meyer will tell you gets harder all the time.

SHAWN MEYER: It seems like the smaller go away and the bigger just get a little bigger.

MORRIS: More than half a million families have stopped raising cattle in the last three decades. Some say efficiency and economies of scale fully account for the decline. Others blame a revolution in the way livestock is sold.

(SOUNDBITE OF AUCTION)

MORRIS: At sale barns like this one in Kingsville, Missouri, cattlemen still bid openly for breeding stock. Meatpackers once bought on the open market, too.

STEVE KAY: But, yeah, those days are over.

MORRIS: Steve Kay, the publisher of Cattle Buyers Weekly, says the four big packing companies now buy mostly on contract, a more sophisticated and efficient arrangement.

KAY: It rewards producers who produce the most consistent, highest quality cattle so that we can then produce more consistent high quality beef for consumers.

MORRIS: Packers get a guaranteed supply. Cattle producers get a guaranteed market. That's good for everybody, according to Mark Dopp with the American Meat Institute.

MARK DOPP: That working relationship gives everybody some certainty and removes risk.

MORRIS: But it also removes a measure of independence and that rankles some cattlemen. The system took hold in the poultry industry years ago. Now, fewer producers raise a whole lot more birds and they work almost exclusively under restrictive contracts for packers.

Fred Stokes, a Mississippi cattleman who runs the Organization for Competitive Markets, says beef is next.

FRED STOKES: We call chickenization. Go the way the poultry guy is, where the farmer owns the land, totes the mortgage, does the work, but is under contract to someone who determines how much he's going to get paid.

MORRIS: And if that pay seems unfairly low, well, Stokes says there's much a producer can do about it under the current interpretation of the Packers and Stockyards Act. This is where Dudley Butler comes in. A lawyer with experience suing poultry processors, Butler took over the Grain Inspection, Packers and Stockyards Administration determined to make litigation against packers easier. Stokes, a friend of Butler's, saw hope for the family farm.

MORRIS: The USDA linked up with the Justice Department to launch a massive study of antitrust issues in agriculture, five big public hearings. Christine Varney was leading a freshly invigorated antitrust division, launching investigations and working closely with Butler. Now, Varney says she's sad to see Butler step down.

CHRISTINE VARNEY: I think he's terrific. I think he's done a great job for farmers in America and I think it's a great loss to the Department of Agriculture, but these are tough jobs and everybody serves their time.

MORRIS: In fact, Varney resigned last summer.

BILL BULLARD: This was the reformist team that was supposed to restore competition to the markets.

BULLARD: Now, they are all gone and we have seen no improvement whatsoever in the ongoing erosion of competition.

MORRIS: Now, that's not the way major meatpacking and livestock groups see it. They say what Bullard would call increased and transparent competition for cattle would have thrown a wrench into the beef industry big enough to cost thousands of jobs, millions of dollars and significantly raise the price of beef. In the end, the House refused to fund implementation of the proposed rule change. So, after a long fight, the big meatpacking companies will keep their efficient production system while smaller producers will continue to scramble for their place in the modern meat industry.